FOMC in Focus
The US dollar has been trading lower over the European morning on Wednesday as traders prepare for the October FOMC later today. The Fed is all-but-guaranteed to slash rates yet again with the latest market pricing reflecting a near 100% likelihood of a .25% rate cut.
With the move priced in, the main focus will be on the Fed’s forward guidance. If the Fed keeps the door open for further easing, we could see USD heavily sold. USD index trades 97.38 last.
EUR Higher on Weak USD
EURUSD has been higher today in light of the weakness in USD. The single currency has also been boosted by the confirmation that Brexit will now be delayed until January 31st.
This move has increased the likelihood of the UK leaving with a deal, thus avoiding an economic cliff edge for either the UK or the EU. EURUSD trades 1.1123 last.
GBP Higher on Elections News
GBPUSD has been firmer today, again benefiting from a weaker USD. The response to news of the Brexit delay has been muted, however, given the upcoming UK elections on December 12th which were agreed in parliament last night.
The elections have added further uncertainty to the picture for GBP trades. However, GBPUSD trades 1.2887 last, recovering well off the 1.2771 lows.
SPX500 Remains Near Highs
Risk assets have had a quiet session so far today. However, they are trading in the green as the market prepares itself for a further rate cut from the Fed. SPX500 remains above the 3028.08 level after breaking out to fresh highs earlier in the week on comments from Trump regarding the increasing proximity of a deal with China.
Safe Havens Rally
Safe havens have seen some upside today as a weaker USD allows for upside in both JPY and gold. USDJPY trades 108.83 last, still sitting above the 108.72 level for now.
XAUUSD trades 1492.87 last as the grind below the 1500 level continues. Tonight’s FOMC could provide the catalyst for a further directional move with bias tilted to the upside for now.
Oil prices have been flat today, broadly unchanged over the session as traders await the next clear directional cues. Reports yesterday suggesting that a US-China trade deal is not quite the “done” deal Trump has made out, weighed on price though we have since stabilized thanks to weakness in USD.
Yesterday the API reported a fourth-consecutive weekly build in US crude stores, which also weighed on prices. Traders will now look to today’s headline EIA report for confirmation. Crude trades 55.55 last, still sitting above the 55 level for now.
BOC Rate Cut in Question
USDCAD has been a little softer do far today given the weakness in USD ahead of the FOMC. However, with sentiment improving given the fresh Brexit delay and likelihood of a US-China trade deal in the near term, there are upside risks today for CAD. The BOC might opt to remain on hold at its October meeting, creating a divergence between it and the Fed. USDCAD trades 1.3080 last, back above the 1.308 level now.
AUDUSD is rising steadily today given the combination of Fed easing expectations and higher optimism around a US-China trade deal. Despite some negative reports yesterday, the market is hopeful that the US and China will press ahead with a deal, keeping AUD supported in the near term. Aussie trades .6878 last, nearing last week’s highs.